Will Rising Cotton Prices End the 'Best' of Times for Indian Textiles Industry?

Many industry people are hoping for softening of the cotton prices after a long spell of hikes which has made manufacturing of yarn a loss-making proposition. Many spinning mills have either curtailed  production by up to 40-50% while some have resorted to closure of the plants for few days.

The moot question is, are the cotton prices likely to come down in the near future, bringing back the smiles on the face of the industry? In my sincere opinion, the answer is *No*, although it might disappoint many. A month back the World Bank also predicted a surge of 40% in international cotton prices this year. The upward movement isn’t expected to stop anytime soon, for sure. The reasons for this are not far to seek:

• A shortfall in the cotton crop for year 2022 as per the Cotton Association of India (323 lakh bales against the estimate of 353 lakh bales);
• Failure of US crop due to drought conditions in Texas, resulting in an increase in global cotton prices;
• Expected shortage of global supply of cotton vis a vis a very robust demand;
• Some cotton areas have been lost to soybeans, corn and other products where prices have already skyrocketed giving farmers a greater bang for their buck;
• Although spinning mills in India have reduced yarn production, incoming cotton supply has also reduced considerably due to hoarding by traders and speculators;
• Ongoing Russia-Ukraine crisis will keep global commodity prices at a higher level;
• At least three months gestation time for the arrival of imported cotton and higher freight costs will restrict cotton imports.

In my opinion, in the short term, there is no solution to this issue as the supply-demand imbalance is playing the pricing dynamics. However, India being one of the top-most cotton producing and cotton textile exporting countries, it needs to take a serious view of this problem and seek a long-term solution.

Here are some suggestions with a long-term view:

• Focus on increasing cotton yield: Indian yield is one of the lowest in the world at only 469 kg/hectare against the world average of 808 kg/hectare. There is a large scope to improve the yield to bring it up to at least the world average. A serious effort is needed from the agriculture ministry and the textile industry to increase the yield by use of best technology, promoting high yielding seed varieties and training the farmers in best farming practices. Corporate farming of cotton can be a way forward for the industry. In India, nearly 80% cotton crop is rain-fed and hence vulnerable to the vagaries of mother nature. More areas are needed to be brought under irrigation to reduce this problem. Also, many a times the crops are damaged due to pest attacks as well as some crop diseases. An early warning mechanism and preventive measures will help save the precious crops.
• Blending with other similar fibres: There are many man-made fibres which are close to cotton in properties. Many spinning mills are now blending with fibres like viscose, lyocell, and modal which have similar properties to cotton and this helps reduce the dependence on cotton. Some of these fibres even have better properties than cotton in some respects like durability, softness and the like.
• Increase use of recycled/regenerated cotton: In order to reduce dependability on new crop cotton and also contributing to the bigger cause of circular economy, it would be best to recycle the cotton waste in order to recover fibres as well as use the process to regenerate the fibres from used cotton garments. This will also help in reducing the textile & clothing waste which finds its place in landfills thus polluting the environment.
• Exercise judicious control over raw cotton exports: With the export of raw cotton (78 lakh bales in 2021), India loses a great opportunity of value addition and also creates a raw material shortage in case of a lower crop. The government needs to be conscious of the sensitivity of this issue and keep monitoring the cotton availability situation while allowing raw cotton exports. However, it would be best if not even a single bale of cotton is exported but instead value-added products like finished textiles, made-ups and garments are exported.
• Increase consumption of man-made fibres: India has so far missed a bigger opportunity in the global markets due to its cotton heavy product portfolio. Majority of the global textile trade happens in man-made fibre-based products. By increasing the usage of man-made fibres in textile manufacturing, the country could broaden its product basket for exports, and this will have two distinct advantages. One of increasing share in global trade through increased exports and other of reducing dependence on cotton.

The metrological department has forecast close to normal rains in major parts of India. This is really good news for cotton crop since majority of the crop comes from rain-fed areas. Also, in view of the higher prices of cotton for over nearly a year, the farmers have enjoyed one of the highest profits in a decade. As a result, a much higher acreage of land is expected to come under cotton cultivation in the coming season. These two factors have raised hopes for higher cotton production in the coming new season and hence hopes for softening of cotton prices after the new season starts.